The ratings reflect Wapic’s balance sheet strength, which A.M. Best categorises as strong, as well as its marginal operating performance, limited business profile and marginal enterprise risk management. The ratings also factor in the group’s exposure to the high levels of economic risk and very high levels of political and financial system risk associated with operating exclusively within Nigeria and Ghana.

Wapic’s balance sheet strength remains at a strong level, and should further stabilise as a result of a prospective capital raise in the near term. Wapic’s balance sheet strength continues to be constrained by its high growth strategy outpacing capital generation and concentrated investment in its associate, Coronation Merchant Bank Limited. Additional offsetting factors include the company’s reliance on reinsurance, and its quality of assets, being limited to investment opportunities in Nigeria and Ghana.

A.M. Best’s marginal assessment of Wapic’s operating performance is underpinned by its history of weak underwriting results, as demonstrated by the five-year (2012-2016) average non-life combined ratio of approximately 164% (as calculated by A.M. Best). Over this period, the company’s technical results have been impacted by pressure on its expense ratio whilst Wapic develops its operating infrastructure to support expansion. Nonetheless, operating earnings in 2017 are anticipated to be positive, primarily supported by investment returns. A.M. Best expects Wapic’s expense ratio to reduce gradually as the company establishes its market profile and is unburdened from non-recurring start-up costs.

Wapic operates as a small composite insurer in Nigeria’s domestic market, with a non-life insurance subsidiary in Ghana. The group achieved 13% top-line growth in 2016, driven primarily by the non-life portfolio, reporting NGN 8 billion of total gross written premium. Wapic aims to expand its profile through targeting the underserved retail insurance sector via the introduction of new and innovative products.